Since July, a new strain of malware has been attacking Android smartphones in China. Dubbed SMSZombie.A, the malware spreads by wallpaper apps on China's largest apps marketplace, GFan.

The apps come with alluring titles, such as "Android Animated Screensaver: Animated Album I Found When I Fixed My Female Coworker's Computer".

When the user sets the in-app wallpaper as their selected wallpaper, they receive a prompt requesting to download additional files. Those files are a malware packaged dubbed "Android System Service". Once installed, that package request administrative privileges, repeatedly popping up the dialogue until the user accepts.

As with various text message scams in the U.S., sending and receiving messages from premium SMS numbers make the bulk of the profit from the malware. As carriers receive a cut of the profits from premium SMS messages, some carriers have been unwilling to block abusive premium SMS entities, even if it means their customers are being ripped off.

The new Android malware is particularly clever as it deletes receipts from premium SMS services, disguising the fees from the user. Researchers suspect the malware may also be attempting to steal bankcard numbers and money transfer receipt details.

The SMSZombie malware acts a malicious Trojan [Image Source: TrustGo]

So far 500,000 Android smartphones in China have been infected by SMSZombie, according to TrustGo, a mobile security firm.

As the actual wallpaper apps contain no direct malware, they are hard for mobile antivirus software to detect. They also reportedly are resistant to removal.

Android malware is most prevalent in China, where poorly regulated third party applications markets dominate the Android software space. Such markets are oft rife with pirated and malicious applications [1][2][3].

In the last quarter approximately 34 million Android smartphones shipped to the Chinese market, according Canalys [source]. The biggest player is Samsung Electronics Comp., Ltd. (KSC:005930), who is shipping close to 10 million units a quarter to the world's biggest smartphone market. Huawei Technologies Comp. (SHE:002502) and HTC Corp. (TPE:2498) also command large Android sales in the market.